It’s almost time to switch those calendars and wave bye-bye to 2016’s addictive TV seasons, which can only mean one thing: awards seasons!
The world is currently abuzz with the Golden Globes nominations, where Netflix, Inc. (NASDAQ:NFLX) fared quite poorly compared to previous years.
The streaming platform and content creator got five nods — three for its drama series The Crown and two for the scary summer-smash Stranger Things. But creative sentiment isn’t the only thing dying down — NFLX stock’s 11% gains this year pale in comparison to its triple-digit run in 2015.
My advice to Netflix stock investors? Don’t worry about awards shows.
When Netflix was first trying to prove it could play the content creation game, a Golden Globe nod was fantastic validation. Now, though, we’re past that point and it would be reductive to assume a slight drop-off in nominations correlates at all with the prospects of NFLX stock.
Last year, Netflix was nominated for Golden Globe awards for six different series. But from an investment perspective, such variety is irrelevant.
Netflix is a subscription product. The content is key to subscription growth, as subscription growth is key to earnings. With that in mind, one could actually argue having one extremely successful TV show (like Stranger Things) is actually more efficient and thus better for the company!
But that, too, comes packed with assumptions. While there is likely some correlation between popularity and Golden Globes due to the quality of the programming, it’s not like Narcos fans are going to stop watching because they were snubbed of another nomination this year!
The point is this: When a company like Netflix wades into the world of content, there are even more judges in the room declaring success by a variety of metrics.
For NFLX stock investors, it’s important to stay focused.
It’s more promising that Stranger Things was produced and owned by Netflix (which, as the company pointed out in its last earnings report, means “more attractive economics and greater business and creative control”) than it would be for the show to take home two Golden Globes.
Similarly, it’s more important that the show fueled earnings last quarter and that earnings estimates continue to improve. The consensus for the current quarter has nearly doubled over the past three months, for instance.
The company has blown away estimates in the past four quarters. Sales growth should prove stoic (35% this quarter, 30% this year), while long-term earnings growth is over 70%.
The Golden Globes might be fun, but from an investment perspective, it’s little more than a distraction. Netflix continues to raise the bar for itself. We already know it’s a legitimate player in the content game and thus such awards are merely a part of living in that world.
Netflix stock investors must stay focused on fundamentals, and I believe those fundamentals remain quite strong.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
